Paid Time Off

NATIONAL CONSTITUTION CENTER
&
KENNETH A. SPRANG, ESQ.

 43% of nation’s private workforce have no sick leave.
 Only one-in-four (23%) of private-sector workers in the
bottom 10% of the wage distribution in their
occupation have paid sick days or leave.
 Eighty-three percent (83%) of employees in the top
10% of their occupational wage distribution have sick
leave.
2Copyright 2011, Kenneth A. Sprang

 Smaller businesses provide less leave
 In companies with fewer than 50 employees, only
51% of workers have paid sick days or leave
 In companies with 500 or more employees, 78% of
employees have such leave.
 Non-union workers are less likely to have paid sick
days or leave (60 percent) than workers who are in
unions (66 percent).
 Consider in light of pending EFCA

 Only three countries – the United States, Canada, and
Japan – have no national policy requiring employers to
provide paid sick days for workers who need to miss
five days of work to recover from the flu. In Canada
provincial law often provides coverage.
 The United States is the only country that does not
provide paid sick leave for a worker undergoing a
fifty-day cancer treatment.

 Traditional leave policies have provided
 Sick leave
 Vacation
 Personal Days
 Jury Duty
 Military Leave
 Holidays
 Bereavement Leave

Average Number of Vacation Days in the United States
Years of Service Average Leave/Year
Less than 1 year 9 days
2 years 11 days
3 years 12 days
4 years 12 days
5 years 14 days
6 years 15 days
7 years 15 days
8 years 16 days
9 years 16 days
10 years 17 days
11 years 18 days

12 years 18 days
13 years 18 days
14 years 19 days
15 years 19 days
More than 15 years 21 days

Average Number of Vacation Days in the United States
Less than 1 year 14 days
2 years 17 days
3 years 18 days
4 years 18 days
5 years 21 days
6 years 23 days
7 years 23 days
8 years 23 days
9 years 23 days
10 years 25 days
11 years 26 days

12 years 26 days
13 years 26 days
14 years 26 days
15 years 27days
More than 15 years 27 days

 In Society for Human Resource Management's 2004
Benefits Survey, 86% of respondents offer some sort of
paid sick leave to employees, either specified as sick
days or in a paid time off plan.
 Average is 11 paid sick days per year.
 Of those who provide paid sick leave, 52% allow some
portion of the unused sick days to be rolled over into
the next year.

 Currently no state mandates sick leave, though several
have entertained proposals, including CT, FL, ME,
MD, MA, MN, MO, MT, NC, OH, PA, VT, and VA
 CA, HI, NJ, NY, RI provide benefits for employees with
temporary illnesses lasting more than 7 days
 San Francisco, Milwaukee and the District of Columbia
mandate sick leave.
 Legislation is now pending in Congress to mandate
sick leave and vacation.

 Would require 1 hour of leave for every 30 hours
worked.
 Accrual up to 7 days (56 hours)
 Employers could require doctor’s certification for more
than 3 successive days

 Would require companies with 50 or more employees
to offer them at least 1 week paid vacation.
 Companies with 100 or more employees would be
required to offer employees at least 2 weeks of paid
vacation.
 Would amend FLSA.

 Necessary to attract and keep talent.
 Employee expectations, custom, etc.
 To encourage sick employees to stay home and get
well.
 To recognize the realities of employees caring for
children and elderly parents.

 Some argue that paid sick leave actually saves business
money, by reducing the spread of illness caused by
employees who can't afford to miss a paycheck.
 If there is no policy for taking paid time off for
illnesses, many workers continue to go to work when
they are sick, jeopardizing their own recovery and
health.

 Research suggests the absence of leave results in
significant costs for employers. Employees who go to
work while sick stay sick longer, lower their
productivity as well as that of their coworkers, and can
spread their illnesses to coworkers, increasing the pool
of absent or low-productivity workers.
 Taking adequate time to rest and recuperate when sick
encourages a faster recovery and helps prevent minor
health conditions from progressing into more serious
illnesses.

 Conservatively estimated, at least 20 million Americans
go to work sick because of a lack of sick leave. Parents
with paid sick days are 5 times more likely to be able to
care for sick children at home than similar parents who
do not have paid sick days. Parents with paid sick days
are also more likely to provide preventive health care.
 Example: Nursing homes that provide their employees
with paid sick days have lower rates of respiratory and
gastrointestinal illness among the patients they serve.

 In a study of nurses, most of whom were middle class,
paid sick days were the only benefit significantly
associated with an increased likelihood of returning to
work after developing heart disease or having a heart
attack.
 Nurses with paid sick days were 2.6 times more likely
to be able to return to work after a heart attack or
angina.
18
Copyright 2011, Kenneth A. Sprang

 Firms that provide paid sick days and leave tend to
have lower job turnover rates, lower recruitment and
training costs, lower unnecessary absenteeism, and a
higher level of productivity than firms that do not offer
these kinds of benefits.

 A 2003 SHRM Survey found that more than two-thirds
of U.S. employers have paid time-off banks, nearly
double the number in 1999.
 Companies promote the policy reasoning that it
rewards employees who never call in sick by giving
them more days to use at their discretion.
 Employers explain they design these programs to
provide workers with more flexibility to deal with
family logistics because they combine vacation, sick,
and personal days into one pool, unlike traditional
plans that allot a set number of days for each purpose.
 Some employers include holidays in their time-off
bank.

 PTO may make even more sense in the modern world.
 "Things are different than they were," explained Lori
Rosen, an analyst for CCH Inc. "Not only are dad and
mom working, but so [are] Aunt Dorothy and
grandma. It used to be that when the kids were sick,
she came over and baked cookies and watched the
kids."
 In a modern world, Rosen added, "PTO is the way to
do it.”

 Employee leave impacts employers costs in a time
when employers are seeking to reduce costs.
 Compensation for employees' time not worked is the
biggest payroll expense after wages and salaries,
consuming 12 cents of every payroll dollar, according
to one consultant.
 Add in pay for overtime or hiring additional workers
to make up for absent employees, and the cost soars
above 22 cents per payroll dollar.

 Workers who are healthy and who have healthy
families generally love PTO’s, as it will increase leisure
or vacation time.
 Employers can treat employees more like adults,
allowing them the freedom to use the PTO as they
choose.
 Unused sick days under a traditional plan often cannot
be carried over to the next year, while unused PTO
days usually can be, often subject to a cap on total days
accrued.

 Employers converting a traditional time-off plan to a
PTO plan often do not give employees the full sum of
the previous accrual rates for vacation, personal and
sick days; they curb the high cost of time off by shaving
some days off the grand total.
 Example: An employee who received 15 vacation
days, 3 personal days and 6 sick days under a
traditional plan might receive only 20 paid days off
under a PTO plan.
 Problem is solvable by maintaining equality in the
conversion.

 Employees with protracted illnesses who use all of
their banked PTO days have few or no days left for
vacation.
 Changes in leave policies represent a "chilling" of
vacation time for American workers who already enjoy
shorter holidays than Europeans and recently have
fallen behind the Japanese.

 One size does not fit all
 Example: Fresh Concepts, which deals with serving
food, excluded sick days from its PTO Plan in order
to ensure that food handlers to not work if they are
sick.
 Employees need to know that "if you're truly ill, you
should stay home and not worry about your PTO
bank,“ according to the company.
 Begin by carefully examining your company and
determining what, if any, special factors of your
business need to be considered.

 Look at past leave statistics in determining how
much PTO to provide.
 Make policy generous enough to allow for sick
leave and vacation. Consider demographics of
your workforce.
 A school with many younger employees of
childbearing age must anticipate the need of
employees to care for sick children.
 Determine your goals, e.g., influencing employee
behavior, attracting talent, etc.
 Consider impact of policy on workforce, i.e., how
will it be perceived.

 Establish a “use it or lose it” policy.
 May want to allow some carryover. Employers
may wish to tie accrued leave to short term or long
term disability policies.
 Supervisors should clearly be empowered to send
sick employees home. Create a culture which
encourages employees to take care of themselves
(and their colleagues). Make it a positive rather
than a negative.
 Consider an Extended Sick Leave program to
complement the PTO.
 Consider a PTO Bank

 Rationale: Employers should encourage employees to
take vacation time.
 European workers are more productive per hour than
American workers—link to vacation?
 If employees are seriously ill, they could use all PTO
leaving no vacation time.
 Plan could accrue hours similar to PTO or be a flat
annual grant of hours. ESL would be available after
one was ill for more than 3 days.

 With PTO, employees use time as they like, giving
advance notice except when used for illness or
emergency.
 Employers still should seek to prevent abuse.
 Employees who misuse the policy, e.g., calling in sick
at the last minute in order to go shopping should be
disciplined.
 Employees who waste away PTO and then are absent a
lengthy period without pay because they lack any PTO,
could face discipline or discharge.
 Any “disciplinary” rules should be clearly set forth in
the policy.

 Some states treat PTO and accrued vacation like wages,
requiring that an employee be paid for unused time.
 A critical element is usually making the policy clear so
that employee expectations are consistent with the
policy.
 Not paying for unused days may encourage
employees to take vacation time. Paying for them
might have the opposite effect.
 May want to allow accrual as part of disability
program, as noted above.

 Applicable law depends, of course, on where you are
located.
 Do not overlook local and state as well as federal law.
 Federal FMLA and ADA may require integration with
the policy.
 Local laws mandating sick leave may or may not allow
PTO in lieu of sick leave.
 If federal law mandating vacation is passed, question
will be whether PTO qualifies.

 FMLA allows employees up to 12 weeks of unpaid
leave for the employee’s own illness or that of a
family member.
 Amendments and new regulations allow
additional leave (up to 26 weeks) to care for a
recovering family member in the armed forces, as
well as “exigency” leave which allows leave for
various reasons caused by a family member’s call
to active duty.
 Some jurisdictions allow more than 12 weeks.
 Employer may require an employee to use paid
leave as part of the FMLA leave.

 Policy should anticipate need for the kinds of leave
allowed under FMLA.
 Consider any state statutes providing for compensation
for employees on leave, e.g., New Jersey. May provide
an offset for your PTO policy.

 The Americans With Disabilities Act requires
reasonable accommodation for disabled employees
who are qualified to do the job.
 Accommodation could involve frequent doctor visits or
other time away from work, though excessive
absenteeism may raise the question of being qualified.
 Policy should be broad enough to allow for
accommodation.

 As with any policy, draft fastidiously and avoid
ambiguity.
 Anticipate as many variables as you can and address
them in the policy.
 Establish clear policies for using PTO, e.g., notice
required.
 Consider differences between blue collar or lower level
work force and executive/managerial/professional
workforce. Do you need separate policies?

POLICY STATEMENT:
Company will offer our Full Time and Part-time with Benefits
employees a Paid Time Off Policy (PTO) that combines vacation, sick,
and personal holidays into a single bank to be used for planned days
off and short term illnesses.
PURPOSE:
Company believes that employees should have opportunities to enjoy
time away from work to help balance their lives and recognizes that
employees have diverse needs for time off from work. Company has
established this paid time off (PTO) policy to meet those needs. The
policy contains provisions for vacation time, personal holiday, and
sick leave. The benefits of PTO are that it promotes a flexible
approach to time off.

1. PTO time is to be used for personal appointments,
vacations, illnesses, religious observances, and personal
days.
2. PTO requests for time off must be scheduled in advance
according to departmental policy. Department Director or
designee must approve all PTO requests and reserve the
right to deny requests if they compromise departmental
standards.
3. Employees will not be allowed to use PTO time until they
have successfully completed their
probationary/introductory period of employment.
Employees leaving prior to the completion of their
probationary/introductory period will not be paid for
accrued PTO benefits.

4. PTO time may be used in one-hour increments.
5. PTO used in a pay period will not be used when calculating
eligibility for overtime pay.
6. PTO cannot be taken for hours not normally worked.
7. Employees must use available PTO when taking off a
normally scheduled day.
8. Employees who work less than their regularly scheduled
hours must apply PTO to make up the difference, with the
exception of a company required absence due to low
workload.
9. Employees may not use PTO to cover a “no call/no show”
or disciplinary suspension.

10. Employees must comply with Company or
departmental call-in procedures. If PTO is available it
must be used for unscheduled time off or call-ins for
personal illness, family illness, transportation
problems, etc. except as prohibited by law while on an
approved FMLA leave.
11. Inability to work a scheduled shift will be considered a
call-in. PTO will be paid regardless of extra time
worked in the pay period.
12. Employees who take frequent unscheduled PTO will
be subject to progressive discipline in accordance with
Company’s attendance policy.

1. PTO rates of accrual are outlined on the employee
Benefits Schedules.
2. Employees will begin accruing PTO time on the date
of hire.
3. PTO time will accrue on all hours paid up to 80 hours
per pay period.
4. The maximum accrual for PTO is 400 hours for full
time and part time employees. Once these maximums
are reached PTO will not continue to accrue.

5. Employees who transfer positions within
Company will retain their accumulated PTO
balances in the new position. Employees
transferring to a non-benefit status will be paid
out the balance of PTO hours accumulated at the
rate the employee was being paid prior to the
status change.
6. Employees will not be allowed to carry a negative
PTO balance. Employees are responsible for being
aware of their PTO balances, which will continue
to be printed on pay stubs.

1. After one year of service, employees may cash in up to
a maximum of 80 hours of their unused PTO balance
as long as they maintain a minimum of a 40-hour
balance.
2. PTO will be paid out at time of termination for those
employees who leave in good standing, have
completed their probationary/introduction period
and have fulfilled their two-week written notice. At
least a four-week notice will be required of salaried
employees. PTO cannot be used during the notice
period unless it was approved prior to giving notice.
PTO is not paid out on involuntary termination.

Employees with vacation accrual balances and remaining
personal holidays will have their eligible vacation balance
converted to their PTO balance. Accrued balances in excess
of 400 hours for full time and part time employees will be
paid out.

 To be effective, policy must be properly administered.
 Some companies have not monitored PTO, to the
chagrin, among others, of their accountants. Might
have Sarbanes-Oxley complications.
 Give supervisors flexibility to make ad hoc decisions,
but provide guidelines.
 Hold supervisors accountable.
 Employee misuse subject to discipline and discharge.
 Develop plan for dealing with employees who exhaust
PTO days but still need time off for illness.

 Give supervisors flexibility to make ad hoc decisions,
but provide guidelines.
 Hold supervisors accountable.
 Design plan to hold accountable employees who abuse.
 Create incentives

 With changing population, e.g., more employees caring
for parents, employees having children later, need to
view flexible time off policies as something good for
the company, not just an increased expense.
 Some empirical data suggests such policies may be as
important as compensation.
 Consider innovation. One company allows employees
to simply take the time they need.
 Hold supervisors and employees accountable.
 There are problems with PTO—one company recently
returned to traditional leave. In my view the ideal is
probably some combination of a PTO and traditional
leave policy. 47Copyright 2011, Kenneth A. Sprang

48
KENNETH A. SPRANG
Washington, DC (202) 683-4090
FAX: (202) 403-3644
ken@wibclaw.com
Copyright 2011, Kenneth A. Sprang

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